Understanding CIBIL Score: RBI Rules And How They Affect Your Credit ?

The central bank has notified all credit issuing companies that a bank or NBFC checking a customer’s credit report must send the information to the customer. This information can be sent through SMS or email. The Reserve Bank of India has taken this decision because there have been many complaints about the credit score. 

What Is A Credit Score?

Creditworthiness is a very important factor in granting loans, especially personal loans. Financial companies and banks that grant personal loans to their customers check their creditworthiness and then grant the corresponding loan. 

However, most customers were often rejected by the bank because they had a bad CIBIL score or problems with their CIBIL score. Now, the RBI has informed the banks about the customers’ CIBIL scores through new rules.

RBI New Rules For CIBIL Score

The Reserve Bank of India has announced new rules important for those applying for personal loans and other types of loans .

Inform Customer 

The RBI instructed all credit information companies to inform the customer when a bank or NBFC checks a customer’s credit report. This information can be sent via SMS or email. There have been many complaints about credit scores, which is why the Reserve Bank of India has taken this decision.

Inform Before Declaring The Default

Suppose the customer needs help to repay the loan to the financial company or bank. In that case, they can fail their system so that other banks also get information about the person, making it easier for them to get financial assistance from different sources.

The RBI informed banks and financial companies about their customers’ defaults before declaring them insolvent. This helps the customer maintain the loan amount within a certain period so that they do not default and get a personal loan next time. 

So if a bank or company declares you insolvent without informing you first, you can sue the bank if the bank does not share this information with you.

Banks Will Be Charged Rs 100 Per Day

If the customer of the bank or the financial company files a complaint, the banks must process the complaint within one month. The RBI will charge the bank 100 rupees per day if it fails to redress the customer’s complaint within 30 days, of which 21 days will be for the bank and 9 days for the credit bureau.  

So if the bank fails to resolve within 21 days, it will be charged 100 rupees daily per person. This will increase the bank’s accountability to the government and the customer and improve transparency between the bank and the customer.

 Reason For Rejection

Banks must give specific reasons why they will not approve your application for a personal loan. Does the bank provide the customer with a reason to improve it and then get a personal loan after he has solved his problem? So, the bank lists all the reasons why a customer’s application might be rejected.

Prepare A Customer's Annual Credit Report

Under the new RBI guidelines, loans from banks and financial companies must prepare a report on the customer’s credit score per their annual transaction activity. However, the customer can also apply for credit score verification individually to their bank but must pay the application fees for credit score verification or credit score check. 

However, banks will provide CIBIL score data to their customers free of cost once a year to inform them about their financial activities and credit status based on government data. This will help the customers improve and maintain their credit score accordingly, and they will be aware of their financial status in the bank’s data.

Conclusion

The RBI’s latest guidelines aim to improve transparency  in the credit information ecosystem. Customers will be notified about access to their credit information. CICs will be asked to ensure the accuracy of data and address customer concerns promptly. These changes will improve the credit scoring process and give individuals greater control over their financial data.

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